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BBVA stock downgraded by Exane BNP amid valuation concerns

EditorEmilio Ghigini
Published 06/12/2024, 03:59 AM
BBVA
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On Wednesday, Banco Bilbao (NYSE:BBVA) Vizcaya Argentaria SA (BBVA:SM) (NYSE: BME:BBVA) experienced a downgrade in its stock rating. Exane BNP Paribas (OTC:BNPQY) shifted the rating from Neutral to Underperform and set a price target of EUR 9.40. The firm cited several reasons for the downgrade, including a belief that the stock has limited upside potential and appears to be richly valued relative to its prospects.

The analyst at Exane BNP Paribas expressed specific concerns regarding BBVA's potential acquisition of Sabadell, suggesting that the anticipated revenue dis-synergies, particularly in a hostile and protracted process, are being underestimated. This view reflects skepticism around the strategic move and its implications for BBVA's financial performance.

In addition to the reservations about the Sabadell deal, the firm has grown more skeptical about BBVA's ability to generate incremental earnings growth from its operations in Mexico over the past year. The analyst's outlook suggests that there may be downside risks to the bank's earnings from this region.

Despite these concerns, the analyst noted that BBVA's Turkish operations are seen as the only positive aspect of the bank's investment case. This indicates that while there are areas of potential within the company's portfolio, they may not be sufficient to offset the perceived challenges in other parts of the business.

BBVA's revised price target of EUR 9.40 reflects the firm's assessment of the stock's future performance in light of these factors. The downgrade and new price target are now key points of consideration for investors monitoring the bank's stock.

In other recent news, Banco Bilbao Vizcaya Argentaria (BBVA) reported a record net attributable profit of EUR 2.2 billion for Q1 2024, marking a 19% increase from the previous year. The bank has also made a takeover bid for Sabadell, currently under review by Sabadell's board.

Deutsche Bank maintains a Buy rating on BBVA stock and has confidence in BBVA's current valuation and prospects following the potential acquisition of Sabadell. Berenberg initiated coverage on BBVA stock with a Hold rating and a price target of $10.10, anticipating the bank's net income to increase by nearly double digits year-over-year in 2024.

These are recent developments for BBVA, which has also made substantial strides in sustainable business, channeling EUR 20 billion into this area with a target of EUR 300 billion by 2025. Sabadell's CEO, Cesar Gonzalez-Bueno, stated that Sabadell does not intend to engage in mergers and acquisitions as a defense strategy against the bid.

Sabadell's chairman, Josep Oliu, indicated that the takeover process could extend into late 2024 or 2025. Despite these developments, BBVA remains focused on its strategic initiatives and organic growth.

InvestingPro Insights

In light of the recent downgrade by Exane BNP Paribas, current real-time data and InvestingPro Tips offer a broader perspective on Banco Bilbao Vizcaya Argentaria SA's (BBVA) financial standing. Notably, BBVA is trading at a low P/E ratio of 7.19, which is even more attractive when adjusted for the last twelve months as of Q1 2024, showing a P/E ratio of 5.72. This suggests that the stock may be undervalued relative to its earnings growth, contradicting the notion of being richly valued as mentioned by the Exane BNP Paribas analyst.

Despite concerns about the bank's profit margins, BBVA's gross profit for the last twelve months as of Q1 2024 stands at an impressive $30.6 billion, with an operating income margin of 54.52%. Additionally, BBVA has shown a strong return over the last year with a 51.85% price total return, which could be of interest to investors looking for companies with a good track record of performance.

For those considering dividend income, it's worth noting that BBVA has a robust dividend yield of 6.59% and has maintained dividend payments for 34 consecutive years, showcasing its commitment to returning value to shareholders. Investors looking to delve deeper into BBVA's investment potential can find additional insights and tips on InvestingPro, with a total of 9 additional InvestingPro Tips available for BBVA. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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